Review 3 Flashcards ECO 202

Dominant Strategy

Betraying the other person will always give me a better outcome, no matter what the other person does.

Nash Equilibrium

Both players betray one another (defect/confess)

Infinite Game

repeated game, we don’t know when it will end. (It will end eventually but we just don’t know when)

Grim Trigger

A strategy used to model an infinite game, where two people are colluding (secretly working together), but in one of the rounds they play, one person decides to defect (betray) the other (The instigator). The person who didn’t betray the other and was colluding (grim trigger player) wont forgive them, and now from here on out, will betray the other (the grim trigger player now betrays the instigator).

Backwards Induction

Method for solving sequential games by reasoning backward from the very end of the game tree to the beginning.

Sequential Game

Order matters, so agents observe previous actions before making their choice. (ex. chess)

Pure Strategy

a specific, deterministic choice that a player makes in a game. Instead of leaving the decision up to chance/probability, the player picks ONE exact action and commits to it with 100% certainty. (player always executes SAME action for a given decision point)